Market Reacts to Mine Fire
The recent fire at the Ozerny mine in Russia has been extinguished, but its impact lingers in the zinc market, causing price fluctuations and supply concerns.
Prices Spike and Fall
After news of the fire broke, the London Metal Exchange (LME) recorded a jump in the three-month metal price to a five-week high of $2,631.50 per metric ton. As the market holds for updates on the mine’s operational status, prices have seen a slight downturn.
Supply Chain Stresses and Mine Curtailments
The zinc supply chain was already under strain due to a series of mine curtailments driven by previously low prices. The closure of multiple mines across various countries, including Sweden’s Boliden and Australia’s Aurora Metals, has led to a drop in smelter treatment terms and a rise in refined zinc price.
Global Supply Impact
Analysts have noted a contraction in global mine supply, influenced by these closures and additional suspensions, such as Nyrstar’s recent closure of its Middle Tennessee mines. The anticipation of new production from the Ozerny mine, expected to contribute significantly to zinc mine supply in 2024, has been a key factor in market sentiment.
Potential Delays in Production
While the Ozerny mine began ore production with plans to ramp up processing operations, the fire raises concerns about potential delays in this timeline. As the company assesses the damage, the future supply from this significant project remains uncertain.
Treatment Charges and Chinese Demand
The falling smelter treatment charges, a response to the tightening concentrates market, reflect the shifts in supply dynamics. With charges at their lowest since January 2022, this indicates a stark change from this year’s high benchmark, a product of 2022’s surplus concentrates.
Chinese smelters have been capitalizing on the available surplus, with imports of zinc concentrates reaching record levels and continuing to climb, impacting national refined zinc output growth projections.
Surpluses and Pricing Trends
Despite forecasts of refined metal surpluses for the coming years, the market is adjusting as it becomes apparent that low prices have pressured numerous producers to cease operations. This has affected the equilibrium, as visible from the low exchange stocks, prompting a reconsideration of the surplus impact on zinc prices.